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Notice of Hearing

IN THE MATTER OF A DISCIPLINARY HEARING PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1 OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re:

Notice of Hearing
File No. 200912


IN THE MATTER OF A DISCIPLINARY HEARING
PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1 OF
THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Carmen G. Moerike



NOTICE OF HEARING


NOTICE is hereby given that a first appearance will take place by teleconference before
a hearing panel of the Prairie Regional Council (the “Hearing Panel”) of the Mutual Fund
Dealers Association of Canada (the “MFDA”) in the hearing room located at 800 – 6th
Avenue S.W., Suite 850, Calgary, Alberta on August 5, 2009, at 10:00 a.m. (Mountain),
or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding
commenced by the MFDA against Carmen G. Moerike (the “Respondent”).

DATED, this 22nd day of June, 2009.

“Jason D. Bennett”

Jason D. Bennett
Corporate Secretary

Mutual Fund Dealers Association of Canada
121 King St. West
Suite 1000
Toronto, Ontario
M5H 3T9
Telephone: 416-943-7431
Fax: 416-361-9781
E-mail: [email protected]

NOTICE is further given that the MFDA alleges the following violations of the By-laws,
Rules or Policies of the MFDA:
Allegation #1: Between January 11, 2002 and January 28, 2008, the Respondent
borrowed monies from clients BC and MF to finance his outside business activities,
thereby giving rise to an actual or potential conflict of interest which the Respondent
failed to address by the exercise of responsible business judgment influenced only by the
best interests of the clients, contrary to MFDA Rule 2.1.41 and MFDA Rule 2.1.1.
Allegation #2: From November 2002 to November 2007, the Respondent accepted and
held a general power of attorney or other similar authorization for clients BC and MF,
contrary to MFDA Rule 2.3.1(a).

Allegation #3: Between September 25, 2006 and March 28, 2007, the Respondent failed
to comply with the policies and procedures of the Members for which he was an
Approved Person by failing to disclose to the Members his personal financial dealings
with clients BC and MF, thereby interfering with the ability of the Members to supervise
his activities, contrary to MFDA Rules 1.1.2 and 2.5.1 and MFDA Rule 2.1.1.
PARTICULARS
NOTICE is further given that the following is a summary of the facts alleged and
intended to be relied upon by the MFDA at the hearing:
Registration History
1.
The Respondent is currently not registered in the securities industry in any
capacity.

1 MFDA Rule 2.1.4 was amended effective February 27, 2006. The Respondent’s conduct commenced
prior to the date of the amendment and continued after the amendment. It is alleged that the Respondent’s
conduct contravened Rule 2.1.4 both before and after it was amended.

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2.
From April 16, 2007 to April 6, 2009, the Respondent was registered in
Saskatchewan, Alberta, British Columbia and Manitoba as a mutual fund salesperson
with IPC Investment Corporation (‘IPC”). The allegations in this Notice of Hearing
concern events that transpired while the Respondent was working as a mutual fund
salesperson in Regina, Saskatchewan.
3.
The Respondent was previously registered in the same jurisdictions as a mutual
fund salesperson with the following Members:
(a) from November 17, 2006 to April 16, 2007, FundEx Investments Inc.
(‘FundEx”); and
(b) from October 2000 to November 2006, with Rice Financial Group Inc. (“Rice
Financial”).
4.
Rice Financial became an MFDA Member on January 11, 2002.2
5.
IPC became an MFDA Member on March 8, 2002.
6.
FundEx became an MFDA Member on April 12, 2002.
Outside Business Activities
7.
The Respondent participated in several disclosed and approved outside business
activities, including:
(a) CCC Acres Inc. (“CCC Acres”); and
(b) 606177 Saskatchewan Ltd. (“606177 Saskatchewan”).
8.
CCC Acres is a company incorporated in the state of Texas. At all material times,
the Respondent was the President and sole Officer and Director of CCC Acres. CCC
Acres invests in real estate in Canyon Lake, Texas. CCC Acres purchases undeveloped
land with the aim of development and resale for profit.

2 On December 19, 2008, Rice Financial changed its name to MGI Financial Inc.

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9.
606177 Saskatchewan is a company incorporated in Saskatchewan. It is owned
and operated by the Respondent. The Respondent states that 606177 Saskatchewan is a
holding company for CCC Acres and Moerike Financial Services, the company through
which he is paid the commissions and fees he earns as a mutual fund salesperson.
10.
The Respondent disclosed CCC Acres and 606177 Saskatchewan as ongoing
outside business activities to his Member(s) and the applicable local securities regulatory
authorities. All three companies are listed on the Respondent’s profile in the National
Registration Database (“NRD”).
Personal Financial Dealings, Acting as Executor & Powers of Attorney
First loan from client BC
11.
In 1997, the Respondent was a mutual fund salesperson with Halmac. BC was a
client of Halmac. At this time, the Respondent, through his company CCC Acres,
borrowed $80,000 US, on an interest-free basis, from BC.
12.
In March 2000, Halmac was purchased by Rice Financial. The Respondent’s
registration as a mutual fund salesperson was transferred to Rice Financial and BC
transferred his account(s) to Rice Financial.
13.
On January 11, 2002, Rice Financial became a Member of the MFDA.
Respondent named executor of client MF’s estate & granted power of attorney
14.
MF was also a client of Rice Financial. In November 2002, the Respondent was
named as the executor of MF’s estate and was granted MF’s power of attorney.
Loan from client MF
15.
On May 1, 2003, the Respondent borrowed $135,485.06 CDN from MF. The loan
was made payable to 606177 Saskatchewan and in return, the Respondent provided MF
with a promissory note from 606177 Saskatchewan. The promissory note stated that the
loan was for a term of five years with an annual interest rate of 5.5%.

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Second loan from client BC
16.
On August 25, 2005, the Respondent borrowed a further $50,000 US from BC.
This second loan was made payable to CCC Acres and in return, the Respondent
provided MF with a promissory note from CCC Acres providing that the loan was for a
term of one year with an annual interest rate of 9%.

Respondent named executor of client BC’s estate & granted power of attorney
17.
In July 2006, the Respondent was named as the executor of BC’s estate and was
granted BC’s power of attorney.
18.
On September 25, 2006, Rice Financial conducted a “Branch Environment
Review” on the Respondent’s branch. During the review, the Respondent informed Rice
Financial that he held powers of attorney for two clients but did not disclose that he had
borrowed funds from the clients for his outside business activities.
19.
In mid-November 2006, the Respondent resigned from Rice Financial and
transferred to FundEx.
20.
BC did not transfer his account(s) to FundEx. MF did transfer her account(s) to
FundEx.
21.
On September 25, 2006, in anticipation of the Respondent transferring his
registration from Rice Financial to FundEx, FundEx required the Respondent to complete
and submit a “Due Diligence Questionnaire”. The form required the Respondent to
disclose any existing conflicts of interests with clients.
22.
The Respondent disclosed the powers of attorney which he held for BC and MF
on the Due Diligence Questionnaire but did not disclose the outstanding loans to BC and
MF.
23.
In April 2007, the Respondent resigned from FundEx and transferred to IPC.
24.
On March 28, 2007, prior to the transfer of his registration to IPC, IPC required

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the Respondent to complete and submit a “Recruiting Profile and Due Diligence Form”.
The form required the Respondent to disclose any existing conflicts of interest with
clients including but not limited to, personal borrowing or lending, business associations
and any designations as executor in client wills.
25.
The Respondent completed the Recruiting Profile and Due Diligence Form but
did not disclose any personal dealings or conflicts of interest with any clients, including
BC and MF.
26.
BC did not transfer his account(s) to IPC. MF did transfer her account(s) to IPC.
27.
On July 24, 2007, the second loan from BC to CCC Acres in the amount of
$50,000 US was renewed. A further promissory note was provided to BC from the
Respondent. The promissory note stated that the loan was for a term of one year and with
an annual interest rate of 9%.
28.
On October 17, 2007, IPC commenced an investigation of the Respondent’s
activities in response to a letter received by IPC expressing concerns about the
Respondent’s dealings with clients.
29.
IPC’s investigation revealed that the Respondent had: (i) participated in personal
financial dealings with clients; (ii) had provided a false statement on due diligence
documentation which specifically requested the disclosure of any personal financial
dealings with clients; and (iii) had been appointed power of attorney and executor of an
IPC client.
30.
On October 31, 2007, MF removed the Respondent as the executor of her estate
and revoked the power of attorney granted to him.
31.
On November 2, 2007, BC revoked the power of attorney he had granted to the
Respondent and on December 8, 2007 removed the Respondent as the executor of her
estate.
32.
On November 2 and 23, 2007, the Respondent made payments in the amounts of
$75,000 CDN and $57,108.43 CDN, including interest in the amount of $2,108.43 CDN,

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to BC in respect of the two outstanding loans from BC.
33.
By letter dated January 23, 2008, IPC notified the Respondent that he would be
terminated unless, among other things, he paid a fine and administrative costs relating to
IPC’s investigation of his activities and he provided evidence of the repayment of the
client loans. The Respondent was given 30 days to comply.
34.
On January 28, 2008, the Respondent repaid the loan owing to MF.
35.
On January 29, 2008, the Respondent informed IPC that he intended to comply
with the requirements set out in IPC’s January 23, 2008 letter. On February 27, 2008, the
Respondent provided IPC with proof that he had satisfied IPC’s requirements, including
in particular repayment of the loans to BC and MF.
36.
By borrowing monies from BC and MF to finance his outside business activities,
the Respondent placed his own interests above those of his clients, thereby giving rise to
an actual or potential conflict of interest which he failed to address by the exercise of
responsible business judgment influenced only by the best interests of the clients,
contrary to MFDA Rule 2.1.4 and MFDA Rule 2.1.1.
37.
By accepting and holding a prohibited a general power of attorney or other similar
authorization for BC and MF, the Respondent acted contrary to MFDA Rule 2.3.1(a).
38.
By failing to comply with the policies and procedures of the Members for which
he was a mutual fund salesperson by failing to disclose to the Members his personal
financial dealings with clients BC and MF, the Respondent interfered with the ability of
the Members to supervise his activities, contrary to MFDA Rules 1.1.2, 2.5.1 and 2.1.1.
NOTICE is further given that the Respondent shall be entitled to appear and be heard
and be represented by counsel or agent at the hearing and to make submissions, present
evidence and call, examine and cross-examine witnesses.
NOTICE is further given that MFDA By-laws provide that if, in the opinion of the

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Hearing Panel, the Respondent:

has failed to carry out any agreement with the MFDA;

has failed to comply with or carry out the provisions of any federal or
provincial statute relating to the business of the Member or of any regulation
or policy made pursuant thereto;

has failed to comply with the provisions of any By-law, Rule or Policy of the
MFDA;

has engaged in any business conduct or practice which such Regional Council
in its discretion considers unbecoming or not in the public interest; or

is otherwise not qualified whether by integrity, solvency, training or
experience,
the Hearing Panel has the power to impose any one or more of the following penalties:
(a) a reprimand;
(b) a fine not exceeding the greater of:
(i)
$5,000,000.00 per offence; and
(ii) an amount equal to three times the profit obtained or loss avoided by
such person as a result of committing the violation;
(c) suspension of the authority of the person to conduct securities related business
for such specified period and upon such terms as the Hearing Panel may
determine;
(d) revocation of the authority of such person to conduct securities related
business;
(e) prohibition of the authority of the person to conduct securities related business
in any capacity for any period of time;

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(f)
such conditions of authority to conduct securities related business as may be
considered appropriate by the Hearing Panel;
NOTICE is further given that the Hearing Panel may, in its discretion, require that the
Respondent pay the whole or any portion of the costs of the proceedings before the
Hearing Panel and any investigation relating thereto.
NOTICE is further given that the Respondent must serve a Reply on Enforcement
Counsel and file a Reply with the Corporate Secretary within twenty (20) days from the
date of service of this Notice of Hearing.
A Reply shall be served upon Enforcement Counsel at:

Mutual Fund Dealers Association of Canada

121 King Street West

Suite 1000

Toronto, ON M5H 3T9

Attention: Maria Abate, Enforcement Counsel

Fax: 416-361-9073

Email: [email protected]
A Reply shall be filed by:
(a) providing 4 copies of the Reply to the Corporate Secretary by personal
delivery, mail or courier to:
The Mutual Fund Dealers Association of Canada
121 King Street West
Suite 1000
Toronto, ON M5H 3T9
Attention: Office of the Corporate Secretary ; or
(b) transmitting 1 copy of the Reply to the Corporate Secretary by fax to fax
number 416-361-9781, provided that the Reply does not exceed 16 pages,
inclusive of the covering page, unless the Corporate Secretary permits
otherwise; or

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(c) transmitting 1 electronic copy of the Reply to the Corporate Secretary by e-
mail at [email protected].
A Reply may either:
(a) specifically deny (with a summary of the facts alleged and intended to be
relied upon by the Respondent, and the conclusions drawn by the Respondent
based on the alleged facts) any or all of the facts alleged or the conclusions
drawn by the MFDA in the Notice of Hearing; or
(b) admit the facts alleged and conclusions drawn by the MFDA in the Notice of
Hearing and plead circumstances in mitigation of any penalty to be assessed.
NOTICE is further given that the Hearing Panel may accept as having been proven any
facts alleged or conclusions drawn by the MFDA in the Notice of Hearing that are not
specifically denied in the Reply.
NOTICE is further given that if the Respondent fails:
(a) to serve and file a Reply; or
(b) attend at the hearing specified in the Notice of Hearing, notwithstanding that a
Reply may have been served,
the Hearing Panel may proceed with the hearing of the matter on the date and the time
and place set out in the Notice of Hearing (or on any subsequent date, at any time and
place), without any further notice to and in the absence of the Respondent, and the
Hearing Panel may accept the facts alleged or the conclusions drawn by the MFDA in the
Notice of Hearing as having been proven and may impose any of the penalties described
in the By-laws.
End.

Doc 177044

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